Earnings Report /
Russia

Detsky Mir: 4Q20 trading update – Moderately positive

  • Detsky Mir (E/W; TP RUB 145/sh) reported its 4Q20 trading update

  • 4Q20 revenue grew 14.4% y/y, expectedly accelerating vs 3Q

  • High-margin categories such as toys and fashion were the key growth drivers during 4Q20

Evgeniy Kipnis
Evgeniy Kipnis

Senior Banking/Consumer Analyst

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Olesya Vorobyeva
Olesya Vorobyeva

Analyst, TMT, Agro and Retail

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Alfa
20 January 2021
Published byAlfa

Detsky Mir (E/W; TP RUB 145/sh) reported its 4Q20 trading update. 4Q20 revenue grew 14.4% y/y, expectedly accelerating vs 3Q. The company has already reported  October and November sales (+16% and + 15% y/y, respectively), thus bringing no material surprise, even implying growth slowdown in December. As a result, 2020 revenue increased 11% y/y, broadly in line with our expectation, but surpassing consensus estimates of 10% y/y growth. LfL sales accelerated in Q4 with high-margin categories (toys and fashion) being key sales drivers. That, coupled with continuous cost optimisation during the year, should result in higher y/y EBITDA margin in 2020, according to the company (11.4% 2020F our estimate vs 10.7% in 2019 under IAS17). We see the results as solid, however, we believe that it is already reflected in prices: currently the stock trades at 6.2xEV/EBITDA 2021F, which is 5% above its historical average. The recent buyout of 25% by Altus Capital creates near-term uncertainty.

  • 4Q20 revenue came at RUB44.5bn, 14.4% higher y/y, accelerating from 13.5% y/y in 3Q20, being affected by successful Black Friday and New Year season sales. As a result, 2020 revenue increased 11% y/y to RUB142.9bn, expectedly surpassing consensus estimates of 10% y/y growth.

  • High-margin categories such as toys and fashion were the key growth drivers during 4Q20, constituting 65.5% share in total revenue.

  • At the same time, 4Q20 sales growth suggests slight growth deceleration in December vs 15-16% y/y growth in November-October.

  • LfL sales growth in Russia accelerated to 5.7% y/y vs. 4.4% y/y in 3Q20, driven by improvement in traffic, which came to positive territory of 1.4% y/y (vs. 1.5% drop y/y in 3Q20), while LfL ticket growth slightly decelerated to +4.3% y/y (vs. +5.9% y/y in 3Q20).

  • Selling space grew 6.4% y/y in 4Q20. Detsky Mir opened 41 new Detsky Mir stores, 11 Detmir Pickup and 7 new Zoozavr stores during 4Q20. Thus, the total openings for 2020 came broadly in line with the company’s guidance and our expectations.

  • 4Q20 online revenue jumped 2.2x y/y to RUB12.7bn and constituted 29.8% of total revenue (vs. 20.7% in 3Q20).

  • Company guides on improved EBITDA margin in 2020 (10.7% in 2019 under IAS17), which corresponds to our expectations (11.4%, +0.6pp).

Figure 1. Detsky Mir operational performance

Source: Company data, Alfa-Bank